FALL HOME UPDATE : Buyers, Sellers Play the Odds as Market Tilts

Three years ago, Susan and Terry Jacobs made what they thought would be a sound investment.

They scraped together a whopping $100,000 down payment and mortgaged themselves to the hilt to pay $450,000 for a three-bedroom house in Carmel Valley.

Today, their blood pressure rises every time they see identical houses advertised for $330,000 by the developer eager to unload them.

Completing the “yuppies-go-crashing-into-the-’90s” picture, Terry lost his job as a commercial developer last April. He was one of the lucky ones; he found another job, but it’s in Minnesota.

So now the young couple is trying to unload their house, one step ahead of the mortgage company foreclosing on them.

“We just hope to get out of here relatively unscathed,” Susan Jacobs said. “We’ll lose our $100,000 down payment--no question about that--but if we can find someone to assume our mortgage ($352,000), then maybe we can still keep a decent credit rating.”

While no one disputes that North County real estate prices overall have been falling--sharply in some cases--they have not dropped in all categories or in all areas.

Hard times are creating the greatest “bargains” in today’s real estate market. Those who find themselves in circumstances that make selling their home a necessity are taking the greatest hit.

“For some people who find themselves in situations where they are forced to sell homes they bought at the peak of the market, they will lose,” said Susan Kent of Chiquita Abbott Realty in Del Mar.

There is no question that the market today is dramatically different from a few years ago, when buyers courted sellers in both the new and existing housing markets. It’s the other way around today.

Buyers now have several key things in their favor: falling prices, plenty of homes to chose from, rock-bottom interest rates, and sellers who are willing to negotiate just about everything.

While there remains some uncertainty about how the market will fare in the future, it is free for now of what many abhorred in past years: speculators interested only in cashing in with a quick turnaround in ownership.

A year ago, the median price (midpoint between the high and low sales prices) of an existing house in San Diego County was $182,000. In July, the most recent month for which data is available, it was $178,000, according to Dataquick Information Systems.

For the sales period May to July, existing home prices in Carlsbad dropped 5.2% from the same period a year before; by 3.5% in Mira Mesa, by 7.7% in Del Mar, by 1.3% in Escondido. While median prices dropped in those and many other areas, they actually climbed elsewhere. For the same three-month period, prices rose 11.1% in Poway and 0.7% in Ramona.

Many homes in the $200,000 range--considered entry-level in some North County communities--have remained relatively stable in value or seen the smallest reductions. But there are a lot of homes for sale in this price range, which includes condominiums and townhomes, as well as single-family homes.

One example is the house in a gated Encinitas community that was purchased, new, three years ago for $230,000. The house is back on the market at about the same price.

Prospective buyers being shown the property can’t fail to notice just how many other “For Sale” signs dot the gated community’s lawns.

Or dot neighborhoods throughout North County.

In the communities of Del Mar, Carmel Valley, Solana Beach, Cardiff, Encinitas, Leucadia, Olivenhain and Rancho Santa Fe, there were 1,564 single-family detached homes and 651 attached units listed for sale last week. This compares to just 617 single-family detached homes and 296 attached ones in May, 1989.

“That’s more than twice the number of available properties in two years,” said Jenny Paschall, president of the San Dieguito Board of Realtors and a broker with the Ranch & Sea Realty office in Cardiff.

Not surprisingly, the average amount of time it takes to sell property has also doubled.

The greatest devaluations in home prices seem to have occurred at the upper end of the market, for which there is a smaller pool of potential buyers. The one market segment resisting such problems may be homes near the ocean. Many waterfront or water-view properties have held their value, agents say.

Still, in the last three years, some high-priced homes have dropped in value as much as 30%.

The owner of a 3,500-square-foot house in Rancho Santa Fe originally listed for sale at $1,445,000 recently dropped the asking price to $985,000. The house had been on the market for about a year.

Although the property may have been overpriced to begin with, the drop is a dramatic one, and draws real estate agents’ attention.

Anxiety about job security and fear that the real estate market will devalue further are reasons potential buyers give for their reluctance to purchase now. And the high number of homes available has made it harder for buyers to be convinced that they are getting the best deal possible.

But, for those who can afford to buy, now is a good time to do so, a number of real estate agents said.

“This is definitely a great time to buy,” said Ginny LeClaire, broker/owner of the Century 21 A-1 Realty office in Escondido.

LeClaire said that a three-bedroom, one-bathroom Escondido home currently listed for $125,000 is the lowest price she has seen. The same house would have listed a year ago at $135,000, and at $150,000 a few years before that.

Today’s sellers often have to offer additional terms if they want to move their property, she said. In many cases, the sellers are asked to pay the closing costs or hold part of the mortgage.

“We’re getting lots of lookers, but people are afraid to commit,” she said. “They find a house they want, but they are worried they could find themselves out of work.”

In an effort to assuage the job-security fears of would-be home buyers, Century 21 is offering a job insurance program. For about $250 a year, the insurance pays the mortgage for a year if the borrower loses his or her job.

LeClaire said her office will soon institute the insurance program, which has met with success in other Century 21 offices.

Marketing of new houses is also much different: far fewer are being built, and prospective buyers are finding developers with inventory eager to deal. In the past, there was little room to negotiate once a developer set the price.

New home construction throughout the area has fallen by 50% to 60% in the last few years, according to Frank Panarisi of the Construction Industry Federation, an umbrella group for seven trade organizations.

In the five North County cities with the biggest blocks of new development (Carlsbad, Escondido, Oceanside, San Marcos and Vista), there were 5,694 permits issued for single-family and multi-unit homes in 1989. This compares with just 2,593 permits in 1991. So far this year, only 774 permits have been issued.

In some cases, developers trying to move unsold units have taken to auctioning them off.

Going to auction doesn’t necessarily mean developers are giving away properties, though. They can maintain the right to reject bids if they aren’t high enough.

At a recent auction in La Jolla, 7,000 people walked through the units to preview them. Yet only 40 people registered to bid. The developer sold 22 of the 26 available units at auction, with sale prices ranging about 15%-18% above the set minimum bids.

As unemployment in the area has risen--in San Diego County it was 7.3% in July compared to 6.8% a year ago--more people have been forced to sell to pay bills or because they’re relocating to find work.

Bill Roberts, broker of the ReMax Carlsbad office, was recently involved in the sale of a Vista home owned by a young couple employed in the high-tech industry. The couple had paid top dollar for their 2,400-square-foot custom home in late 1988. Three months ago, the husband lost his job. The couple lived off their savings while the husband looked for other employment.

He did find another job--in Arizona--and the couple wound up selling their home for less than they had paid for it.

But, for every hardship seller story, there is a happy buyer tale.

Many people previously shut out of homeownership in North County are finding a way to buy a home for the first time, said Roberts.

“As prices come down, buyers who couldn’t afford a house are suddenly able to,” he said.

For some who already own their home, lower interest rates and reductions in prices have made this a good time to move into a larger home without increasing monthly housing costs.

Two financial advantages still tip the balance for potential buyers: Mortgage interest remains the only consumer debt that is a tax write-off, and proceeds from a home sale aren’t taxed as long as another home of equal or greater cost is purchased within two years.

May to July Home Sales

The median price of homes sold in North County during the second quarter was lower than the year before, but the change varied from place to place. Some areas had sharp drops; a few had gains. Here’s how some communities fared in the May-July sales period. (Prices in thousands of dollars.)

Median Change No. Sold Change SFR From Last From City Price 1991 3 Mos. 1991 Bonsall $232 19.2% 10 150.0% Cardiff 207 -9.1 18 -50.0 Carlsbad 237 -5.2 146 -13.6 Del Mar 387 -7.7 102 -15.0 Encinitas 255 -3.4 151 0.7 Escondido 173 -1.3 342 -10.0 Fallbrook 175 -22.7 89 -23.3 Lake Hodges 216 -0.2 318 -18.0 Mira Mesa 162 -3.5 174 -4.4 Oceanside 158 -4.3 349 -11.9 Poway 208 11.1 202 -3.8 Ramona 180 0.7 89 -19.1 Rancho Santa Fe 918 -10.8 15 -40.0 San Marcos 152 -5.3 82 -14.6 Scripps Ranch 276 -5.8 61 -6.2 Solana Beach 376 -3.7 30 -11.8 Vista 171 -3.0 219 -8.8

Source: Southern California Real Estate Observer

TIPS FOR BUYERS, SELLERS

Real estate experts offer this advice to sellers:

* Don’t sell in today’s market unless you really must. If you are forced to leave the area because of a job or family situation, you may not have a choice. But unless you have a compelling reason, this isn’t the best time to sell your existing home. The market is already flooded with available homes.

* If you must sell, get serious. Forget what your home was worth three years ago and price it accordingly.

* Be prepared to offer special terms to a would-be buyer. In some cases, sellers are asked to pay all or part of the closing costs, or hold a portion of the mortgage.

And this advice to buyers:

* Decide on the neighborhood you want to live in first. Then study the property values. Look at what homes are actually selling for, not just the price for which they are listed.

* Find out how long the home you’re interested in has been on the market. If a house has been available a long time, it can mean a number of things: The owner isn’t willing to take less for it, or the owner may be growing impatient.

* Shopping till you drop isn’t a smart philosophy when it comes to buying real estate. A lot of research and comparison shopping can be done from your desk.

More Homes for Sale

In two years, the number of homes for sale has doubled in some areas. Chart includes listings for Del Mar, Olivenhain, Solana Beach, Cardiff, Carmel Valley, Encinitas, Leucadia and Rancho Santa Fe.

More Homes for Sale

Today May ’91 Mar. ’90 May ’89 Single-family detached 1,564 1,439 782 617 Days on market 144 113 82 71 Attached homes 651 622 346 296 Days on market 128 108 70 75

Source: San Dieguito Board of Realtors

Fewer Building Permits

Construction of new housing in North County has slowed dramatically. These statistics show the change in building permits issued for Carlsbad, Escondido, Oceanside, San Marcos and Vista.

1989 1990 1991 1992* Single-family 3,955 1,755 1,909 667 Multiple-family 1,739 1,177 684 107 Total 5,694 2,932 2,593 1,000

* 1992 figures are January through August; totals are estimated.

Source: Construction Industry Federation